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Brazil After PT: the Trajectory from Lula to Bolsonaro

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Jair Bolsonaro is Brazil’s new leader. Elected with more than 55% of the valid votes on Sunday (28), the former military will run the country from January 1, 2019. Together with his election, a major electoral period of the last 30 years comes to an end.

The greatest transformation that comes with the 2018 general elections is undoubtedly the defeat of the Workers Party (PT) after four consecutive victories. The acronym led the country from 2003, with the election of one of the party’s founders, Lula, to 2016, the year Dilma Rousseff was dismissed through impeachment.

Despite the polarization that has become common, to what extent will the military’s management differ from PT? What factors explain the rise and fall of the party? Will the new president deliver what he promises to the market?

In this regard, we elaborated a retrospective on the main points of the controversial PT trajectory in the presidential chair of Brazil. In addition, we talked to the Professor of Political Science at Uninter Doacir Quadros University Center to get to know more on the governance between Bolsonaro and the National Congress.

The Brazilian Dream

“We’ve never been so happy.” The phrase figured in the cover of the 2010 edition of the magazine IstoÉ, one of the weekly publications of greater circulation of the country. In Brazil at the time, there seemed to be no other feeling but optimism.

Gross Domestic Product (GDP) had grown 7.5% in that year, according to the Brazilian Institute of Geography and Statistics (IBGE), behind only China (10.3%) and India (8.6%). Class C, the protagonist in the rise of 35 million people to the Brazilian middle class between 2002 and 2012, boasted an unprecedented buying power.

The economic stability of the decade showed its results in the feeling of well-being experienced by the Brazilians. The global economic crisis of 2008, which depressed the Brazilian GDP to a 0.2% decline in 2009, did not reach directly the population. In order to explain this scenario of growth, it is fundamental to resume the trajectory of the country from 2002.

In that year, the country underwent a major political transformation with the election of Luiz Inacio Lula da Silva, who assumed the Presidency of the Republic in a scenario of distrust of the market. The positioning of the then Labor Party (PT) candidate in relation to the market justified the insecurity: the propensity to heat up at the International Monetary Fund (IMF), for example, was mentioned by him a few times throughout his political career.

The market’s tension with the “Lula Effect” eased when Lula reviewed his speech and proposals. The landmark of this repositioning was the “Letter to the Brazilian people”, released in 2002 to present a more moderate tone regarding the economy. After being elected, it brought together an economic team of a technical nature, aligned to the market and integrated mainly by the renowned banker and executive Henrique Meirelles. Gradually, the figure of the trade unionist gave way to that of a politician who won the trust of investors.

This scenario of prosperity was stimulated by a number of factors. The combination of the commodity boom, the growth of the industry, and the increase in the service sector have in fact produced satisfactory economic and social indicators. Based on these positive indices, Lula’s governments have been unharmed even by a major corruption scandal involving the purchase of votes from parliamentarians, known as “Mensalão”. Although widely publicized in the press between 2005 and 2006, the scheme did not shake the president’s popularity, re-elected with more than 60 percent of the vote in 2006.

The numbers of the first decade of the century can give the dimension of the scenario that the country lived. Unemployment, which stood at 13% in 2003, reached about 6% in 2010. The minimum wage grew by an average of 9% a year between 2003 and 2010. Social programs such as the Bolsa Família – which allocates assistance to families and ProUni – which facilitates the access of middle-class students to private higher education – has reached millions of Brazilians. As a result of a heated economy, strong purchasing power, and solid social policies, Lula leaves the post of president with an approval of 83%, the largest in Brazil’s history.

In 2010, unable to run again for the presidency, the leader chose the former Minister of Mines and Energy and the Civil House, Dilma Rousseff, as successor. Without the charisma of the political godfather, but heir to the bonus of a successful government, Dilma was elected in 2010 to continue PT’s trajectory in command of Brazil.

From optimism to a crisis

Dilma Rousseff assumes the country in a scenario of stability, but the bonanza inherited from Lula’s administrations already showed signs of exhaustion.
The former president’s first term was marked by the timid growth of the economy. In 2011, GDP grew by 2.7%, well below the projected 5.5% and 7.5% in 2010. The figures remained subdued in 2012, registering only 0.9% growth. A slight improvement was registered in 2013: driven by higher investment, GDP grew by 2.3%. By 2014, a growth of 0.5% already indicated the recession that was to come.

The aggravation of the economic crisis in Brazil occurs especially from 2015, due to a great imbalance in the public accounts and a drastic fall in the collection of the government among other factors. The fiscal disparity has had a cascade effect on the economy, but to understand the ramifications of this recession on the legitimacy of PT, some elements are fundamental.

Dilma Rousseff’s government and, in a way, the entire political system, were caught by surprise by large popular demonstrations that took the streets of the country in 2013. The “June Days”, as the protests became known, showed the dissatisfaction of the Brazilians with the poor quality of public services and lack of honesty in politics. Although not the only target of the demonstrations, Dilma Rousseff’s government was relatively shaken by demonstrations, responsible for “rekindling” the political debate at an intensity that has long been unseen in the country.

In the political field, the launching of the Lava Jato operation in March 2014 is another key point to understand the beginning of PT’s collapse. The investigation dismantled a grand scheme of money laundering and wasting Petrobras, the country’s largest state-owned company. Entrepreneurs from various sectors and politicians from various parties were investigated and arrested for involvement with the scheme. The operation, which lasted until this year, hit PT’s image in full.

It is in this scenario that Dilma Rousseff is re-elected in 2014, in a fierce contest with Aécio Neves, from PSDB. The victory, however, does not guarantee any stability to PT: with few allies in Congress, the former president finds herself in the midst of the greatest economic recession in the country’s history and a political crisis practically inescapable.

In 2015, the Brazilian economy registers one of its worst performances. The fall of 3.8% of GDP is part of the country’s long list of negative indices in this period: between 2014 and 2016, unemployment jumped from 4.8% of the Economically Active Population (EAP) to 11.5%, reaching more than 12 million Brazilians. Inflation reached 10.62% in 2016, the highest rate since 2002.

Without governance, with a major economic crisis to solve and deeply affected by the corruption scandals revealed by the Lava Jato, the government of Dilma Rousseff is put in check in a process of impeachment motivated by the realization of “fiscal pedals”, a mechanism used to improve artificially the public accounts. After a political crisis that dragged by 2015 and 2016, Dilma is destitute of the Presidency of the Republic, giving place to the deputy of its plate, Michel Temer.

PT as opposition and the 2018 elections

The fact that Michel Temer is on the plate of Dilma Rousseff can be considered only a detail. This is because, as soon as he assumed the presidency, the current head of the Federal Executive reoriented the federal government’s economic policy, deepening fiscal adjustment and making structural changes to which PT was resistant.

The first initiative of the government of Michel Temer was the approval of Constitutional Amendment (EC) 95/2016, which limited the primary expenditures of the government in the attempt to control the deficit and make possible the payment of the debt. The approval of the Labor Reform and other measures also contributed to the balance of public accounts. Although shy, the GDP of 2017 showed a growth of 1% after two large consecutive falls.

The reform considered the most necessary to adjust the public accounts, however, did not leave the role in the Temer government: Social Security. The unpopularity of the bill made the parliamentarians back from voting on account of the election period. And it is no exaggeration to say that the market’s tension over the passage of reforms was central to the 2018 elections.

During the electoral period, Bolsonaro’s preference for the market became clearer, since his government plan more accurately points to the realization of the reforms of the Social Security and tax and for the privatization of the state, for example. PT’s candidate for the presidency, Fernando Haddad, nominated by Lula to run for the presidency in his place, did not reach the market clearly on approval of the reforms. The dollar, which reached $ 4.19 during the first round, fell considerably when Bolsonaro emerged as a favorite for the presidency. Now elected, the challenges are different: will he be able to deliver what he has promised to the market?

Projects and governance of Bolsonaro

Jair Bolsonaro, the holder of a controversial political career, marked by controversial and sometimes undemocratic statements, arrives at the Presidency of the Republic in a period of great expectations.

In his plan of government, the former deputy ensures that structural reforms and fiscal adjustment will be priorities. If PT was located on the left in the political spectrum – whether by the clear intervention of the State in the economy or by the prioritization of social programs – the Bolsonaro government represents the intensification of a neoliberal orientation in the economy. Privatization, for example, occupies a privileged place in its plan of government.

To get these projects out of paper, however, the next president will have to build his governability in a Federal Senate and a House of Representatives whose formation is even more fragmented than the current one. Other points, however, favor Bolsonaro: the PSL, the party for which it was elected, went from 8 federal deputies elected in 2014 to 52, the second largest seat of the House from 2019.

Professor of Political Science at the University Center Uninter Doacir Quadros analyzes that the next composition of the National Congress is aligned in a spectrum of “center-right”, a positive scenario for the next president.

“Being more right-wing parties, they would be closer to Jair Bolsonaro’s own government program. And because they are center parties, they tend to be more flexible in their positions. In a way, this facilitates the management of Jair Bolsonaro, “says Quadros.

For Quadros, precisely because of this composition, a possible government of Fernando Haddad would have more difficulties to achieve good governance. The existence of this political affinity between the Bolsonaro and National Congress, however, does not remove the centrality of the negotiation between the future president and the parliamentarians.

“There is a very great need for Bolsonaro’s own ability to make these negotiations, to attend to the interests of the parties and at the same time to meet the interests of his government project,” he says.

Quadros identifies an attenuation in the speech of Bolsonaro, the central strategy for the construction of the governability of any president. “It is well known that the electoral speech is to win votes. When the management begins, in fact, this discourse has to be adapted in front of the various interests that will be at stake. At first, I understand that the Bolsonaro is already showing this attenuation in his speech given that it is necessary, “he says.

What about e-commerce in this scenario?

After the election period, it is natural for market tensions to ease. As we show in this post, the fluctuation of the exchange rate in electoral periods is expected, since it is a moment of instability. It is likely that, with the election of Bolsonaro, the forecasts will be confirmed and that the real will remain in the trajectory of valorization in which it is since the first round of the elections.

In relation to the Bolsonaro economic program, its favorable position for structural reforms, expenditure control, and debt repayment, as well as its probable governability with the National Congress, point to a scenario of relative stability for the Brazilian market. You have to wait to see how quickly you can approve the reforms.

Now, in addition to the stabilization of the currency and the political projects proposed for the country, it is worth saying that the e-commerce market in Brazil has shown a continuous growth in recent years. Even during the country’s biggest economic recession, the number of active e-consumers – those who made at least one virtual purchase per year – rose from 31.2 million in 2013 to 55.1 million in 2017, according to the Webshoppers study.

And all indications are that it will grow even more: in the first quarter of 2018, e-commerce grew 13.1% over the same period last year. In other words, political turbulence aside, the country continues to have great potential for consumption and should not be underestimated by international companies.

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